KERRY OBRIEN: When Federal Governments go hunting for Budget cuts as the Rudd Government is doing now, the Department of Defence is usually enough of a sacred cow to avoid the knife. This time, there are a lot of people asking why and the reason's simple. Defence has an unenviable reputation for waste and inefficiency. Some time in the very near future it's likely that the new Government will abandon two major defence projects that have cost taxpayers close to $3 billion. The projects are the Super Sea Sprite Helicopter and the costly update of four FFG Frigates. The problems don't end there. The Government now says there are $23 billion worth of Defence acquisitions that have a medium to high chance of failure. A staggering projection, begging the question, how could it happen? Mark Bannerman reports.

MARK BANNERMAN: From Afghanistan to East Timor, from the Gulf to the Pacific, Australia's army, Navy and Air Force are being tested to the limit.

ARMY OFFICER: Mate, are you in for this, or what?

MARK BANNERMAN: But as any expert will quickly tell you, a modern Defence Force is only as good as the equipment it's given, and right now, there are big questions over key defence purchases and the amount of money we pay for them. How would you describe the acquisition process as you've seen it at this point?

PROFESSOR HUGH WHITE, STRATEGIC AND DEFENCE STUDIES, ANU: There are a lot of projects at the moment which are in serious trouble and a lot of the decisions we've made particularly over the last few years I think have made some of those problems worse.

MARK BANNERMAN: No wonder experts are concerned, as it now stands the army has spent half a billion dollars on tanks of questionable strategic value. The Navy has FFG Frigates that can't be deployed in combat zones because their radar and weapon systems would make them easy targets for the enemy. And the development of the Wedgetail early warning aircraft essential to air defence has been delayed. In all, it's estimated that up to $23 billion worth of defence projects are behind schedule, having major cost overruns, or simply don't work. How would you describe the legacy that you've been left?

SENATOR NICK MINCHIN, OPPOSITION DEFENCE SPOKESMAN: I would say to the new Labor Government, they should be extraordinarily grateful to the Coalition for leaving them a vastly improved defence procurement system than the one that we inherited from the then Labor Government in 1996.

MARK BANNERMAN: It's a view that's hard to sustain when you look at the case of the Super Sea Sprite Helicopter.

ALLAN BEHM, FORMER DEFENCE OFFICIAL: I think the Sea Sprite has been a pretty shocking project from beginning to end, not that it's ended and it probably never will.

MARK BANNERMAN: In 1997 when the Navy decided it needed new Sub Chasing Helicopters it effectively chose to create its very own chopper. To do that, it bought helicopter bodies manufactured in the 1960s and tried to fit them with state of the art weapon systems. Ten years and nearly $1 billion later the Super Sea Sprite Helicopters have become a Defence Force joke.

PROFESSOR HUGH WHITE: The mistake we made there was to aim to make them much more sophisticated than they really needed to be. By aiming for a very sophisticated system, we drove up the risks involved that the project would go wrong. Those risks have indeed come to past. We have a project which doesn't deliver any kind of capability at all.

MARK BANNERMAN: The problems exemplified in the Sea Sprite debacle are apparent in these ships. This FFG Frigate may look capable enough, but it can't be sent into battle and the reason is simple. Its combat system upgraded at a major cost, simply don't work effectively.

The question is, how did this happen?

ALLAN BEHM: We really don't exercise tight discipline over our project management. If the project management teams were operating in the private sector they had all be sacked. Because simply, the cost overruns would be totally unacceptable.

JoeL FITZGIBBON: Cost blow outs and failures to deliver.

MARK BANNERMAN: Enter new Defence Minister Joel Fitzgibbon. In the job just a few months, the Minister has made it clear Defence procurement is a priority for him. And his first task might well be a decision to abandon the Sea Sprite Helicopter project altogether.

JoeL FITZGIBBON: Many are saying it should be abandoned and this is a very, very tough decision for the new Government and it's a nasty piece of work to inherit from the former Government. But we'll just work thoroughly and carefully through it as quickly as we can.

MARK BANNERMAN: You may have on the table the possibility of just ditching it altogether?

JoeL FITZGIBBON: I don't rule out any possibility in respect of the Sea Sprite Helicopters. I don't rule out any possibility. I suppose therefore the answer to that question is yes we could.

MARK BANNERMAN: If all this sounds like the Government has a major problem on its hands, well you'd be right and there may be worse to come. Right now if you talk to the experts they say there's a new Defence acquisition that's still effectively on the drawing boards but may turn out to be the biggest most expensive problem of them all. Given Australia's isolation, the key to strategic defence is the Air Force. Last year, the then Defence Minister Brendan Nelson made a decision to purchase 24 Super Hornet jet fighters. It left defence experts stunned.

Last year, you effectively said this plane was a dog. Have you changed your view in any way about that?

PETER CRISS: I said it was a super dog and it's a super dog squared as far as I'm concerned. As we found out more and more about it, it's abysmal in every area that is so critical to buying a fighter strike type aircraft. It cannot perform.

MARK BANNERMAN: The former chief of Australia's operational Air Force isn't just worried about the choice of the Super Hornet that he believes is slower and more vulnerable than the plane it replaces, what really concerns Peter Criss most is that no one inside the Defence Force or the department was prepared to stand up and argue against the decision.

PETER CRISS: I know there's a bunch of them that know the Super Hornet is a dog, alright. They've told me, they've told acquaintances of mine, friends of mine that they are terribly concerned about it. But it was the decision taken by the Minister at very short notice for whatever reasons and foisted on them.

SENATOR NICK MINCHIN: I think it will be seen in time as one of the most prudent and sensible decisions our Government made and I have every confidence that the Labor Government will support the contract and uphold the contract.

MARK BANNERMAN: Despite this assurance, the new Government has announced a full review of the Super Hornet purchase, but as Peter Criss says, it's not the review that's crucial, but the people selected to do it.

PETER CRISS: I'm worried how that study's done. I hope it involves experts outside the Defence Department. You've got to get impartial advice into this process.

MARK BANNERMAN: Are you going to have external advice?

JoeL FITZGIBBON: Whether it's formal or informal, every Minister should always look to source as much information and advice from as many groups as he or she possibly can and that will always be my intention.

MARK BANNERMAN: So can I take it from what you're saying that there will be external advice on that matter?

JoeL FITZGIBBON: I should say, I have confidence in the Australian Defence Force and all the advice I've been receiving in the two months I've been in the job that be excellent advice. But I will always look for other sources of advice outside defence.

MARK BANNERMAN: It would be a massive understatement to say the new Minister has a big job in front of him. $23 billion worth of new projects are now being reassessed. Those decisions will impact on people in the front line, but others say there is far more at stake.

PETER CRISS: The nation is put at risk and that's why there's so much strident criticism about the Super Hornet decision, because if we don't control the air at the time and place of our choosing then the nation is put at risk and that affects everyone, not just those who put on a uniform.

KERRY OBRIEN: Look for some early announcements from the new Minister. That report from Mark Bannerman.